Square, a leader in mobile payments, today launched a gift card service tied to its Square Wallet program.

The new service is designed to let anyone purchase a gift card for friends or family at any of the more than 250,000 businesses nationwide that accept Square Wallet, an iOS and Android app that lets users pay automatically with their mobile device. The recipient would then redeem the value of the gift using Square Wallet on their own device. All it takes to send a gift, Square said, is to pick a merchant, choose the amount, and enter the name or email address of the recipient. They will then get a message letting them know about their gift. The service allows recipients to store the value directly in Square Wallet, or to print out a QR code that they can bring into the merchant if they don't have an account. The service also allows iOS users to redeem the gifts using Apple's Passbook.

An image showing a Square gift card that the company's founder, Jack Dorsey, gave his father.
Square

The value of a service like this is that it means that anyone with a Square Wallet account can give anyone else a gift at any of the quarter-million merchants that accept Square Wallet payments -- regardless of whether or not the recipient has an account. And without the merchant having to do anything. "I can literally sit on my sofa and reward all my friends and family, and colleagues," said Square COO Keith Rabois, "and treat them to unique opportunities to enjoy life, without leaving my house."

A recipient with an account can walk into any merchant that uses Square Register, a system that lets them take credit cards, track sales and inventory, and generate analytics, and spend the money, which is automatically deducted from their account. Recipients don't even need to remember that they got the gift since the next time they go to the appropriate merchant, Square Wallet will "credit you without you even thinking," Rabois said.

The gift card business is estimated to be worth $100 billion annually, yet tens of millions of dollars of such gifts expire every day, according to CouponTrade.com. Rabois said he expects that very few Square gift card recipients will neglect to redeem them, given how easy it is to do so. "I expect almost universal redemption," Rabois said. "You save (the gift) in your phone forever. You don't have to remember to bring" a plastic card with you to redeem it.

Added Rabois, "It works at the spots that are most important to you. I'd be shocked if people don't redeem this product as opposed to traditional cards."

He also noted that iOS users will be able to tie the gift cards they receive to Passbook. Apple has recently attempted to get in on the gift card game by letting iOS 6 users store the cards in Passbook. Square is clearly hoping it can be the digital gift card service of choice for millions of iOS and Android users. The San Francisco startup has been developing more and more ways for users to pay. It started by providing merchants with plug-in dongles for iOS devices that let anyone take credit cards, and then launched Square Wallet and Square Register.

The company, which is already processing more than $10 billion in annualized transactions, also recently launched a partnership that lets customers pay using Square Wallet at more than 7,000 Starbucks outlets in the United States. Square is clearly hoping to leverage that partnership with the gift cards initiative, as Starbucks is one of the merchants for which users can send gifts.